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Recovery of Legal Fees in Franchise Litigation

Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

Date: 09/07/2011 | Category: Start a Franchise | No comments

In the recent decision of Bennigan's Franchising Co‚ LLC v. Team Irish‚ Inc.‚ et al‚ the Federal District Court for the Northern District of Texas‚ awarded the franchisor the partial recovery of legal fees. The legal issues involved in this case involved typical violations of a development agreement and the non-payment of royalties. The parties ultimately stipulated to a money judgment in favor of the franchisor respecting the portion of the franchisor's claims related to unpaid royalties.

What is of interest in this decision is that the issue of attorney fees was left open. After evaluating the express terms of the Franchise Agreement the court held that the franchisor was a "prevailing party" even though the parties settled and that the franchisor recovered only as to a portion of the franchisors overall claims‚ the franchisor was nevertheless entitled to recover fees. The amount of the legal fees were‚ however‚ limited to those fees directly related to the unpaid royalty claim.

Question for franchisors and franchise lawyers? Should your franchise agreement "attorney fee" provision be modified to specifiy the full recovery of "all legal fees" should you "prevail" as to any legal claim?

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